If Workers Always See Inflation Coming, and If They Demand

question 146

Multiple Choice

If workers always see inflation coming, and if they demand wage increases in advance so that inflation does not erode real wages, then the economy's aggregate supply curve on the AD-AS diagram will

• A)be a vertical line corresponding to potential GDP.
• B)be a horizontal line corresponding to potential GDP.
• C)slope downward.
• D)slope upward.

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